A unique way to create value for customers.
Market Segmentation, Product Differentiation and Brand Positioning are the three strategic decisions that a company must clearly define to compete successfully and achieve operational efficiency that translates into profitability.
Every time a company has identified the market segment that it is interested in serving and in which it wants to obtain a unique and exclusive position, it must develop and offer its customers a sustainable competitive advantage in order to differentiate itself and not face its competitors head-on..
For many companies this translates into an internal task of honing their core competencies: being more productive, more efficient, more agile, faster, bigger.
Such a stance involves two enormous risks: internal vision is not enough and core competencies are not an end in themselves, even in the short term.
In the long term, the only criterion of superiority for a company is profitability. Growing up, being big, agile or productive makes sense only if the company is more profitable than its competitors over time. And most likely, you will succeed if you find a unique way to compete that allows you to stand out and differentiate yourself, that is, a unique way to create value for your customers.
The three marketing strategies are closely linked to the three dimensions of the company's business definition (technology, markets, benefits), so they are not limited to solving a functional aspect of the company, but rather help to establish its competitive strategy. like an everything.
In the business definition of the company, the technology dimension refers to the way of doing things and it is what shapes the products and services offered to customers. Of course, technology constitutes an elementary basis for differentiation, however, strategically it is not enough, among other reasons, because it changes too quickly.
The markets dimension provides a more stable definition base, in addition to making sense of technology by relating it to the groups of clients that you want to serve. In other words, the products and services are not sufficient by themselves for the business to grow and be profitable, but must be exchanged with certain groups of clients, chosen under a segmentation strategy.
Products and Markets must be linked by something that makes their exchange possible. A product or service, more than the set of its physical characteristics, represents for customers a solution to their problems, a satisfaction of their needs. In one expression, it represents benefits that the company makes clear through its positioning strategy.
The benefits that customers receive through the acquisition, use and enjoyment of products and services are the basis for defining a business that is more stable over time, since in essence they never change. Thus, the positioning of a brand works best when it is done on the basis of the benefits it provides, not on the intrinsic characteristics of the product or service covered by it.
In the long term, then, only companies whose clear strategic definition allows them to maintain consistent performance over long periods of time will be profitable. This clear strategic definition begins with a correct definition of the business to which it is dedicated and a singular orientation of its way of competing.
The differentiation strategy requires the design of a significant set of differences to distinguish the company's products / services from those of the competition.
Differentiating yourself from your competitors will allow you to create a unique and exclusive position, a unique way of competing, that translates into superior value for your clients.
We call this superior value for customers a competitive advantage, that is, a definitive and clearly distinguishable superiority of a product or service, offered under a unique identity and with significant value to a market segment.
The economist perspective of several renowned business strategy authors leads them to consider supply and demand as two basic paths of differentiation.
The supply, or production, path seeks operational efficiency to perfect market best practices and produce and serve at the lowest cost. The path of demand, or market, looks for clients whose needs can be uniquely met.
But, since the bond of union between products and markets is the implicit benefit in the exchange relationship between company and client, it is better to develop the company's differentiation strategy in light of the comparison that the client makes between what he receives and sacrifice in a transaction.
The client expresses his comparison in terms of the value of the transaction, so that the company that offers greater value than its competitors has a competitive advantage.
The following graph shows how the comparison is made and makes it clear that to increase the value of the transaction it is necessary to (a) increase the offered profit, (b) reduce the required sacrifice or (c) a combination of both.
Offering a better product or service and charging a lower price are just two of the six possible differentiation paths, and possibly the most difficult to sustain, given the speed of technological change and the ease of response of the competition in the short term, especially at low prices.
Defining a successful market strategy imposes three strict requirements on the company, which not all entrepreneurs are willing to assume:
1- Establish limits, either to the groups of clients to be served or to the products / services to be offered, or both, to define a market access line.
2- Make concessions, or trade-offs, that is, deliberately stop doing something in order to be unique and exclusive in another activity.
3- Create fully integrated activity systems, as opposed to managing Critical Success Factors and / or Core Competencies in isolation.
Competitive advantage involves offering an exchange whose benefits and sacrifices are consistently well valued by the customer, difficult to imitate by the competition, and likely to be maintained by the company over time.
